Two Colo. Lawmakers Offer Tax-Reform Plan To Revamp School Aid

With barely four weeks left in their 1997 legislative session, two
Colorado lawmakers have unveiled a tax-reform measure that would
overhaul school finance in the state.

Their bill--introduced early this month--would shift the state
funding foundation for public schools from a heavy reliance on property
taxes by first making major increases in corporate income taxes and
sales taxes and then drawing school funding from those sources.

Some observers were surprised that the sponsors would introduce such
ambitious legislation at a time when the legislature is usually
scrambling to finish work on bills introduced early in the session.

But the sponsors--Senate President Tom Norton and House Majority
Leader Norma Anderson, both Republicans--have said that the time for
blue-ribbon studies is past and that only by proposing a specific tax
overhaul would there be any chance for action.

"This is something we've been looking at for two or three years, and
the bill is a serious attempt to get something the legislature could
consider this session," Mr. Norton said in an interview last week.

Unlike in some other states, where property-tax changes have been
considered in the context of a push for school finance equity, the
Colorado measure centers on promoting tax stability for schools.

"This is not an equity bill," the Senate president said. "We just do
not have a method of funding schools that responds to economic
changes."

Shifting the Funding Balance

Local property taxes now pay about half the $3 billion the state
spends on public education. Sponsors of the overhaul say the reliance
on property taxes makes it difficult for the state and school districts
to respond to changes in the economy.

The tax-reform bill calls for funding schools through increases in
the sales tax, use taxes, and corporate income taxes. The state sales
tax would increase from 3 percent to 4.75 percent. Corporate income
taxes would climb from 5 percent to 12 percent. The measure would not
affect locally approved property-tax increases targeted to schools,
only cut the state property tax for education.

The measure would require voter approval because it would amend a
15-year-old state constitutional provision that caps the proportion of
state revenue from residential property taxes at 45 percent. Under that
provision, while the value of residential property has tended to
increase at a faster rate than business property because of more
frequent sales, the business community has shouldered more of the
property-tax burden.

That change has helped business lobbyists greet the plan with an
open mind, even though corporate income taxes would increase.

Meanwhile, education groups generally favor some form of tax
overhaul, said Phil Fox, the associate director of the Colorado
Association of School Executives.

Citing the limitation on residential property taxes' share of the
state budget combined with other tax limitations in Colorado law, Mr.
Fox said that, "by the year 1999 or 2000, the state will only be able
to fund [enrollment growth] in schools and not make any contribution
toward inflation."

"Our organization is going to do what we can to support the overall
thrust of this," he added. "There might be minor details we would want
to see changed."

Moving Too Fast?

The bill has been approved by two House committees, although some
legislators said they voted for it only to allow fuller debate on the
House floor.

Last week, however, Gov. Roy Romer, a Democrat, voiced concern that
the legislature was moving too fast. Gov. Romer said he would prefer to
call a special session this year to consider the tax overhaul.

The governor praised Sen. Norton and Rep. Anderson for tackling the
difficult issue, but he told local reporters he was concerned about the
ramifications of increasing the sales and corporate income taxes.

The proposed increase in corporate income taxes might drive
businesses away from the state, he said, while the hefty sales-tax jump
could induce people to shop by catalog or the Internet.

But he expressed a willingness to work on a major tax revision.

"It is time for us to work comprehensively on our tax system," Mr.
Romer said. "This is one of the most courageous things we can do."

The regular legislative session ends May 7. Only the governor can
call a special session. The last such session was held in 1993 and
addressed youth-violence issues.